North Eastern Properties Ltd v Coleman & Quinn
| Jurisdiction | England & Wales |
| Judge | Mr Justice Briggs,Lady Justice Smith,Lord Justice Longmore |
| Judgment Date | 19 March 2010 |
| Neutral Citation | [2010] EWCA Civ 277 |
| Docket Number | Case No: A3/2009/2046 |
| Court | Court of Appeal (Civil Division) |
| Date | 19 March 2010 |
[2010] EWCA Civ 277
His Honour Judge Behrens
Before: Lord Justice Longmore
Lady Justice Smith
and
Mr Justice Briggs
Case No: A3/2009/2046
8NE 09088
IN THE HIGH COURT OF JUSTICE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM NEWCASTLE UPON TYNE DISTRICT REGISTRY
Mr Charles Holland (instructed by Wholley Goodings LLP, Northumberland NE61 1YB) for the Appellants
Mr Jonathan Rodger (instructed by Sintons LLP, Newcastle upon Tyne NE4 6DB)
for the Respondent
Hearing date: 9 th March 2010
Mr Justice Briggs:
INTRODUCTION
This is an appeal from an Order for specific performance made by HH Judge Behrens sitting as a Deputy Judge of the Chancery Division in the Newcastle upon Tyne District Registry on 20 th August 2009, at the conclusion of the trial of a vendor and purchaser dispute. The Appellants Damien Coleman and Patrick Quinn were the purchasers under eleven contracts in substantially identical terms (save as to price) dated 24 th October 2007 for the sale of eleven flats in a development then under construction at Elmfield Court, Bedlington, Northumberland. The successful claimant North Eastern Properties Ltd was the vendor under each of those contracts and is the Respondent to this appeal.
The Appellants resisted the claim for specific performance upon two main grounds. The first was that each of the written contracts failed to include an agreed term of the sale, namely that the Respondent would pay the Appellants upon exchange a sum equal to 2% of the advertised list price for the flat in question, so that the contracts fell foul of section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 (“the 1989 Act”). The second was that, in any event, the Appellants had rescinded each of the contracts by accepting a repudiatory breach of each of them, constituted by the Respondent's failure to complete the property development within the time specified in a completion notice given by letter dated 23 rd May 2008. I shall refer to those defences respectively as raising the section 2 issue and the rescission issue. Judge Behrens rejected both of them and by this appeal the Appellants argue that he was wrong to do so.
This appeal therefore falls into two self-contained parts. Each of them involves points of substance which do not appear to be the subject of any decisive authority. The section 2 issue concerns, in part, the effect of the inclusion in a contract for the sale of land of an entire agreement clause, following the earlier negotiation of a term not included in the contract. The second raises (at least potentially) the question whether an election to accept a repudiatory breach of contract may be contained in a ‘time of the essence’ notice which, necessarily, precedes the occurrence of the relevant repudiatory breach.
THE FACTS
The relevant facts are set out with admirable brevity and precision in the Judge's reserved judgment, and this appeal includes no challenge to his findings.
The Appellants are two businessmen from Northern Ireland, each of whom had a portfolio of properties both in Northern Ireland and the Northeast of England. They wished to acquire flats in the Respondent's development at Elmfield Court, not for their own use, but for on-sale or letting.
Negotiations between the parties began in about July 2007. At that time Elmfield Court was in the course of construction, pursuant to a building contract made in 2006 between the Respondent and Deansfield Developments Ltd. At a site meeting attended by the Respondent, the Appellants and others in late July 2007 the Respondent by its director Mr Brian McCartney told those present that the development was expected to be completed at the end of 2007.
Initial negotiations took place between the parties’ respective agents, Ms Edington of Rook Matthews Sayer for the Respondent and Ms Luhr of Sarah Luhr Property Search for the Appellants. Flats at Elmfield Court were advertised for sale by reference to a list which included prices ranging between £106,000 and £115,000. The Appellants’ opening bid consisted of an offer to buy twelve specific flats with a discount of 12% off the list price, contained in an email from Ms Luhr to Ms Edington on 2 nd August 2007.
In the course of telephone discussions the parties then agreed upon a sale of the twelve flats at a discount of 10% off the list price, subject to a reservation fee of £500 per flat (i.e. £6,000) payable to the Respondent, and to exchange of contracts within 28 days. This subject to contract oral agreement was recorded in an email dated 4 th August from Ms Edington to Mr McCartney and Ms Luhr.
On the following day Mr Coleman sent an email to Ms Luhr containing the following passage:
“Contracts must be assignable and 8% disclosed on the contract as a builder's incentive.
The 2% will be invoiced to the builder as a finder's fee at exchange of contracts and then paid to ourselves. Will have to be a separate contract or agreement for this.”
Ms Luhr forwarded that email to Ms Edington, with a copy to Mr McCartney.
Later on the same day Mr McCartney responded by email to Ms Luhr, copied to Ms Edington, including the following passage:
“In line with your e-mail we would agree to set out the purchase contracts as you have detailed it i.e; An assignable contract with our company offering an 8% discount off the published price list and a further 2% paid to your company by cheque or bank transfer on production of an invoice totalling 10%.
We would agree on a 28 day period to exchange of contracts from the day your reservation which is £500 per apartment (12 x £500 = £6000) this amount is deducted from your final balance.”
Plainly, this agreement to split the 10% discount into 8% and 2% was subject to contract.
Both parties then instructed solicitors. The Respondent retained Sintons of Newcastle and the Appellants retained Wholley Goodings of Morpeth. The pre-contract reservation deposit of £6,000 for the twelve flats was duly paid to the Respondent by 13 th August.
On 21 st August Sintons sent twelve draft contracts to Wholley Goodings each of which specified a price 8% less than the list price, and made no reference to the 2% finders fee. Nor did the draft contracts provide expressly for them to be assignable.
On 28 th August Wholley Goodings returned the draft contracts to Sintons under cover of a letter in the following terms:
“Unfortunately we must return the agreements to you for each of the 12 units as our clients have instructed us that all the agreements must be assignable. We also understand that on exchange of contracts, our clients will be paid a “Finders Fee” of 2% of the purchase price for each of the units. We therefore look forward to receiving amended agreements together with confirmation that the Finders Fee” of 2% for each of the units is agreed by your client company.”
On the following day Sintons sent Wholley Goodings twelve amended contracts including in each of them an express right to assign. The covering letter stated that:
“Our client has instructed us that the “Finders Fee” which you mention will be dealt with direct and will not form part of the Contract.”
By 26 th September it had become apparent to the Respondent that the December 2007 estimate for the completion of the development no longer held good, and that completion of the development was unlikely to take place earlier than late February 2008. The Respondent did not inform the Appellants about this change.
In the meantime the Appellants found a buyer (a Mr Anderson) for one of the flats (Unit 22) and on 11 th October Wholley Goodings informed Sintons that a fresh contract should be issued for Unit 22 direct to him, in place of the draft contract for the sale of Unit 22 to their clients. This was duly done, with the result that contracts for the sale of the 11 remaining flats were duly exchanged between the parties on 24 th October 2007. Although the 2% finders fee was, pursuant to the exchange of emails which I have described, due upon exchange, it was not paid then, nor has it ever been paid. Each of the contracts, as exchanged, conferred on the Appellants an express right of assignment and made no mention of the 2% finders fee.
It is important to identify, as an aspect of the relevant facts, the reasons why the Appellants requested, and the Respondent agreed, both to include an express right of assignment in each contract, and to exclude any reference to the 2% finders fee. This is touched upon in paragraph 10 of the Judgment, and was explained in more detail (pursuant to enquiries from the bench) by counsel appearing on the appeal, there being no dispute between the parties about the reasoning. I have mentioned that the Appellants wished to on-sell some of the flats, I infer to residential sub-purchasers. They wished to be able to do so by a simple assignment to their intending sub-purchaser of a contract for the purchase of a flat, thereby giving to the sub-purchaser the benefit of the 8% price reduction below the list price reflected in the agreed purchase price in the contract. The 2% finders fee was to be the Appellants’ profit from participating in the chain of sales. Thus, their sub-purchasers were not to be permitted to rely upon the 2% finders fee as an additional deduction from the purchase price payable on completion.
Nor was the finders fee only to be payable on completion. It was payable on exchange, as...
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